Article · 8 min read

Affirmative Rights in a Term Sheet

Namratha Krishnan · Ediplis Counsels Free Intermediate India

In Indian deals the real control lever often sits next to the board seat: affirmative rights (reserved matters) in the term sheet and shareholders' agreement. This piece lists exactly what an investor can veto (share capital changes, key hires and exits, new debt, business suspension) and cites the Shubkam Ventures ruling on why these rights alone do not legally hand over control, which is the India-specific nuance a founder needs before signing.

  • Affirmative or reserved rights let an investor veto specific decisions even without a board majority: capital changes, senior hires, new debt, charter amendments, winding down.
  • Indian precedent (Shubkam Ventures) holds that affirmative rights alone do not equal legal control under the SEBI Takeover Code, but they still bind founders on day-to-day moves.
  • Read the reserved matters list as carefully as the board seat: it is where an investor gets a say without ever needing to sit on the board.
Open on ediplis.com ↗

The question it answers

  1. What does a board seat in my term sheet actually let the investor do?

Read with it

  1. This is the canonical founder-side explainer of what a board actually is and when you owe someone a seat. It spells out the... Y Combinator Startup Library Article · 15 min read How to Create and Manage a Board Y Combinator (Kirsty Nathoo and Aaron Epstein)
  2. Iskold does the board control math out loud with a worked example: two 40% founders sell 20% to an investor, and the investor... Startup Hacks (2048 Ventures) Article · 12 min read Understanding Startup Board Control Alex Iskold
eChai Partner Brands The partnership →